Currently, and especially after the recent global financial crisis, it has become not easier for companies to get financial resources for their specific investments1. In particular it is difficult to get conventional and traditional loans by banks to finance start ups or special and innovative projects of entrepreneurship. For this reason it is important to find new ways of financing. For this purpose, it seems useful, to modify the relatively new “Crowdfunding” mainly and so far used for financing artistic projects into an appropriate kind of corporate financing, called “CROWDINVESTING”. The following paper would theoretically develop the Crowdinvesting and encourage it to use in everyday business of SMEs2.
Keywords: Crowdfunding, crowdinvesting, corporate finance, credit clamp, funding, lending, SME;
Crowdfunding3, equally translated as a so-called cluster financing, is an internet based form of financing for projects, products and business ideas or to be more precise so-called actions, which have existed in this form for only a few years. While Crowdfunding previ- ously rather served art and cultural projects, one should just now and in the future use this alternative sources of finance and forms as a result of ever increasing difficulties for com- panies and their projects to respectively procure start up financing or rather loan capital, by modifying the Crowdfunding to an alternative source of corporate finance, in order to make this sort of financing definitely possible to be able to generate the necessary equity for investments or the proportional equity for the procurement of loan capital.
Even medium sized companies, after the last world-wide finance and economic crisis, still have difficulties with capital for growth and innovation. The theme “medium sized financ- ing” has not become eased off since the last crises in 2007 and 2009 but instead it has be- come far more complicated than before. To be sure there are national and international so- called state funded means of financial help for small and medium sized businesses and in particular for entrepreneurs.
A large proportion of them imply that private and co-operative credit institutes with limited but therefore partial risk or more precisely liability with the smallest interest margins have to adopt co-financing together with the state or rather public funding institutes. The readiness and motivation of a large amount of banks is for this purpose occasionally coined as being weak. Through often inflated and unnecessarily complicated working processes in banks, the probability for companies and in particular for start-ups to get authorized tailored financing is rated as being rather low.
The inescapable consequences hereof are avoidable company bankruptcy and the impossi- bility of being able to even put innovative projects or start-ups in to place. The further de- velopment of Crowdfunding in the area of company financing can be classified as so- called Crowdinvesting4. With this innovative, quite intelligent and above all unconven- tional form of financing, it is also possible to counteract the restrictive lending policy of many banks and in the process to enable the closure of future or existing financial gaps.
3 The historical development of Crowdfunding as the origin of a reori- entation for Crowdinvesting
From a historical point of view, Crowdfunding (CF) is a relatively recent term for a new form of loan financing in comparison to conventional means of financing. The term first emerged in the year 2000 in the USA and was developed during the course 2006 for in- stance as the internet platform‚ “sellaband.com” which enables artists to finance their music album in advance by fans themselves.
The developed finance form of CF was shaped, amongst others, by Jeff Rowe5 based on his initiated Crowdsourcing6. The idea of CF fundamentally derives from creative artists. Crowdfunding is based on the collective merits of the cooperation of many people (the crowd), whose attention for certain actions and projects is awakened by the internet and who then make money for financing available beforehand by relying upon the advised suc- cess of the action or the project. The purpose of individual CF projects is multifaceted, from the support of creative projects (musical production), to political campaigns, to start- ups and then at the other end of the spectrum, to smaller entrepreneurial projects.
4 Objective of the essay
The following essay will discuss and demonstrate, on what premises, on the basis of prin- ciples or more precisely main features of CF, this so-called Crowdinvesting can be modi- fied, in order to be able to introduce it in an efficient and skilful manner in the area of company or corporate financing. The authors even go so far as to claim that, with the Crowdinvesting for companies via “smart investors” or rather private investors, a kind of far-reaching “peoples-share”, English “folk stock” ore “public stock” are created and in the process, the principles of capitalism are actually reversed in the sense of producing a common overlap of interesting companies and projects with socio-economic issues for a national economy and its individuals. The implementation of Crowdinvesting can indeed be understood as a new kind of Corporate Social Responsibility (CRS).
1 „Credit clamp“ is a hot topic in many companies in the small and medium enterprises.
2 SME = small and medium enterprises
3 Crowd = swarm, bulk, plenty of; funding = financing, sourcing; crowd sourced capital
4 Synonym: CROWDFINANCING
5 Jeff Howe is a professor of journalism at Northeastern University and the founder of The Atlantic's 1book140, a Twitter-based book club.
6 Crowdsourcing is a distributed problem-solving and production process that involves outsourcing tasks to a network of people, also known as the crowd. This process can occur both online and offline. The difference between crowdsourcing and ordinary outsourcing is that a task or problem is outsourced to an undefined public rather than a specific other body. Crowdsourcing is related to, but not the same as, human-based computation, which refers to the ways in which humans and computers can work together to solve problems. These two methods can be used together to accomplish tasks.
- Quote paper
- Rainer Schenk (Author)Prof. Dr. Ing. Elena Horska (Author), 2012, Crowdinvesting , Munich, GRIN Verlag, https://www.grin.com/document/192959